At first glance, buying shares of Novavax (NASDAQ:NVAX) seems very appealing. NVAX stock has climbed over 3,200% in 2020 so far.
Furthermore, the company is part of Operation Warp Speed. This means the federal government has given Novavax funding to help rapidly move its vaccine candidate through clinical trials.
But investors have been here before. If you look at the historic price chart for NVAX stock, you can see this isn’t the first time the stock has had a meteoric climb. In each case, the stock failed to get a vaccine to market. And subsequently, the stock has come crashing back down to earth.
That’s the nature of biotech stocks. But I’ll admit that speculators invested in biotech companies this year have been largely rewarded. None perhaps more so than investors who bought into NVAX stock.
However, Novavax does not have a product on the market. And that’s been the case throughout the company’s 33 years as a publicly traded company.
Novavax Has to Make Up Some Ground
Novavax uses proprietary recombinant nanoparticle vaccine technology that, according to the company’s website allows it to “produce vaccine candidates to efficiently and effectively respond to both known and emerging disease threats.”
My InvestorPlace colleague Tezcan Gecgil, summarized where Novavax is at in its progress towards a vaccine:
“The Phase 1 portion of the company’s trial will be placebo-controlled and observer-blinded in around 130 healthy adults and will include assessment of dosage and vaccination. Recruiting for the trial began in May. Therefore, the company is still a long way away from delivering a final product. Investors are waiting for encouraging clinical results data.”
Novavax is expected to announce the results of the Phase 1 portion of its vaccine trial the week of August 3. Coincidentally, the company reports earnings on August 5 so investors will have plenty of concrete data form which to make their decisions on NVAX stock.
Assuming the vaccine candidate clears Phase 1, Novavax is on a fast track to get the Phase 2 study started quickly. And the company has ambitious plans for a Phase 3 trial in the fall of this year.
The Field is Narrowing
While we hear about the dozens of companies that are competing to develop a Covid-19 vaccine, the field is starting to narrow considerably. Pfizer (NYSE:PFE) has teamed with BioNTech (NASDAQ:BNTX) for a candidate now in its Phase 3 trial. Moderna (NASDAQ:MRNA) is on a similar path.
These are critical milestones, and there is no guarantee of initial success. Nevertheless, there seems to be consensus forming that a vaccine will be available sometime before the end of the year.
And Chris Lau also reminds investors that vaccines aren’t the only track being pursued. Regeneron (NASDAQ:REGN) and other companies such as Eli Lilly (NYSE:LLY) and AbbVie (NYSE:ABBV) are developing antibody therapies.
Is There Another Catalyst for NVAX Stock?
Ironically, where Novavax may ultimately find success is with its influenza vaccine candidate, NanoFlu. Lost in the initial buzz about the company’s Covid-19 candidate was a very successful Phase 3 trial of NanoFlu in March.
This means the company can file for approval, which seems likely. And that means that Novavax would have a product in the market with the potential for sales of over $1 billion.
The Proof Will Come From Performance
It’s possible that Novavax will emerge from the coronavirus race as the leading candidate. But the company has not yet reported results from its Phase 1 trial. In the meantime, companies like Pfizer are already moving into Phase 3 human trials.
Once again, that doesn’t mean Novavax can’t come from behind, but the company’s margin for error is getting smaller. And with a gain of more than 3,000% this year, I have to question if the stock has gone as far as it can on just the news. Now, the company has to deliver.
There will be a lot of news for Novavax this week, but base your investment on what the news actually means. Because ultimately there will only be one vaccine. Without news that separates Novavax from the field, I don’t see NVAX stock climbing much higher, but history shows it can go a lot lower really fast.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for Investor Place since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.